SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(A) of the Securities
Exchange Act of 1934 (Amendment No.__ )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
THE KOREA FUND, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identity the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
345 Park Avenue
[LOGO] New York, New York 10154
(800) 349-4281
The Korea Fund, Inc. August 20, 2004
--------------------------------------------------------------------------------
To the Stockholders:
The Annual Meeting of Stockholders (the "Annual Meeting") of The Korea Fund,
Inc. (the "Fund") is to be held at 10:45 a.m., Eastern time, on Wednesday,
October 6, 2004, at the offices of Deutsche Investment Management Americas Inc.,
part of Deutsche Asset Management, 29th Floor, East Side, 280 Park Avenue (at
48th-49th Streets), New York, New York 10017. Stockholders who are unable to
attend the Annual Meeting are strongly encouraged to vote by proxy, which is
customary in corporate meetings of this kind. A Proxy Statement regarding the
Annual Meeting, a proxy card for your vote at the Annual Meeting and an envelope
-- postage prepaid -- in which to return your proxy card are enclosed.
At the Annual Meeting, the stockholders will elect two Directors and consider
one stockholder proposal, if the stockholder proposal is properly presented to
the Annual Meeting. In addition, the stockholders present will hear a report on
the Fund. There will be an opportunity to discuss matters of interest to you as
a stockholder. All of our independent directors plan to attend this meeting and
look forward to meeting interested stockholders.
Your Fund's Directors recommend that you vote in favor of each of the two
nominees for Directors and against the stockholder proposal.
Respectfully,
/s/Robert J. Callander
Robert J. Callander
Chairman of the Board
on behalf of the full Board
--------------------------------------------------------------------------------
STOCKHOLDERS ARE URGED TO SIGN THE PROXY CARD AND MAIL IT IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE SO AS TO ENSURE A QUORUM AT THE MEETING. THIS IS
IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES.
--------------------------------------------------------------------------------
THE KOREA FUND, INC.
Notice of Annual Meeting of Stockholders
To the Stockholders of
The Korea Fund, Inc.:
Please take notice that the Annual Meeting of Stockholders (the "Annual
Meeting") of The Korea Fund, Inc. (the "Fund") has been called to be held at the
offices of Deutsche Investment Management Americas Inc., part of Deutsche Asset
Management, 29th Floor, East Side, 280 Park Avenue (at 48th-49th Streets), New
York, New York 10017, on Wednesday, October 6, 2004 at 10:45 a.m., Eastern time,
for the following purposes:
To elect two Directors of the Fund to hold office for a term of three years
and until their successors shall have been duly elected and qualified; and
To consider one stockholder proposal, if properly presented to the Annual
Meeting.
The appointed proxies will vote in their discretion on any other business as may
properly come before the meeting or any adjournments or postponements thereof.
Holders of record of the shares of common stock of the Fund at the close of
business on July 19, 2004 are entitled to vote at the meeting or any
adjournments or postponements thereof.
By order of the Board of Directors,
/s/John Millette
John Millette, Secretary
August 20, 2004
--------------------------------------------------------------------------------
IMPORTANT -- We urge you to sign and date the enclosed proxy card and return it
in the enclosed addressed envelope which requires no postage and is intended for
your convenience. Your prompt return of the enclosed proxy card may save the
Fund the necessity and expense of further solicitations to ensure a quorum at
the Annual Meeting. If you can attend the meeting and wish to vote your shares
in person at that time, you will be able to do so.
--------------------------------------------------------------------------------
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of The Korea Fund, Inc., a Maryland corporation (the
"Fund"), for use at the Annual Meeting of Stockholders, to be held at the
offices of Deutsche Investment Management Americas Inc. ("DeIM" or the
"Investment Manager"), part of Deutsche Asset Management, 29th Floor, East Side,
280 Park Avenue (at 48th-49th Streets), New York, New York 10017, on Wednesday,
October 6, 2004 at 10:45 a.m., Eastern time, and at any adjournments or
postponements thereof (collectively, the "Meeting").
This Proxy Statement, the Notice of Annual Meeting and the proxy card are first
being mailed to stockholders on or about August 20, 2004 or as soon as
practicable thereafter. Any stockholder giving a proxy has the power to revoke
it prior to the time the proxy is exercised by attending the Meeting and casting
his or her votes in person or by mail, by executing a superseding proxy or by
submitting a notice of revocation to the Fund (addressed to the Secretary at the
principal executive office of the Fund, 345 Park Avenue, New York, New York
10154). All properly executed proxies received in time for the Meeting will be
voted as specified in the proxy or, if no specification is made, for each of the
nominees for director named in the Proxy Statement, against the stockholder
proposal referred to in the Proxy Statement and in the discretion of the proxy
holders on any other matter that may properly come before the Meeting.
The presence at any stockholders' meeting, in person or by proxy, of
stockholders entitled to cast a majority of the votes entitled to be cast shall
be necessary and sufficient to constitute a quorum for the transaction of
business. For purposes of determining the presence of a quorum for transacting
business at the Meeting, abstentions and broker "non-votes" will be treated as
shares that are present but which have not been voted. Broker non-votes are
proxies received by the Fund from brokers or nominees when the broker or nominee
has neither received instructions from the beneficial owner or other persons
entitled to vote nor has discretionary power to vote on a particular matter.
Accordingly, stockholders are urged to forward their voting instructions
promptly.
With respect to Proposal 1 (the election of director nominees), abstentions and
broker-non-votes will have the same effect as a vote not to elect the nominees,
because election of a nominee requires the affirmative vote of a majority of the
shares present in person or by proxy and entitled to vote. See "Proposal 1:
Election of Directors -- Required Vote." With respect to Proposal 2 (the
stockholder proposal), abstentions and broker non-votes will have the same
effect as a vote against the proposal, because approval of the proposal requires
the affirmative vote of holders of 67% of the Fund's shares that are present at
the meeting (in person or by proxy) or, if less, more than 50% of the Fund's
outstanding shares. See "Proposal 2: Stockholder Proposal."
Holders of record of the common stock of the Fund at the close of business on
July 19, 2004 (the "Record Date") will be entitled to one vote per share on all
business of the Meeting and any adjournments or postponements. There were
44,701,497 shares of common stock outstanding on the Record Date.
The Fund provides periodic reports to all stockholders which highlight relevant
information including investment results and a review of portfolio changes. You
may receive an additional copy of the annual report for the fiscal year ended
June 30, 2004 and a copy of the semiannual report for the six-month period ended
December 31, 2003, without charge, by calling 800-349-4281 or 800-294-4366 or
writing the Fund at 345 Park Avenue, New York, New York 10154.
1
PROPOSAL 1: ELECTION OF DIRECTORS
Persons named in the accompanying proxy card intend, in the absence of contrary
instructions, to vote all proxies in favor of the election of the two nominees
listed below as Directors of the Fund to serve for a term of three years, and
until their successors are duly elected and qualify. Both nominees have
consented to stand for election and to serve if elected. If any such nominee
should be unable to serve, an event not now anticipated, the proxies will be
voted for such person, if any, as shall be designated by the Board of Directors
to replace any such nominee. For election of Directors at the Meeting, the Board
of Directors has approved the nomination of the individuals listed below.
Information Concerning Nominees
The following table sets forth certain information concerning each of the two
nominees as a Director of the Fund. Each of the nominees is now a Director of
the Fund. Unless otherwise noted, each of the nominees has engaged in the
principal occupation listed in the following table for more than five years, but
not necessarily in the same capacity.
Class I -- Nominees to serve until 2007 Annual Meeting of Stockholders:
Present Office with the Dollar Range Aggregate Dollar Range of
Fund, if any; Principal of Equity Equity Securities in All
Occupation or Employment Year Securities in Registered Investment
Name (Age) and Directorships First the Fund as Companies Overseen by Director
Address in Publicly Held Became a of June 30, in Family of Investment
Interested Director* Companies Director 2004^1 Companies as of June 30, 2004^1
-------------------------------------------------------------------------------------------------------------
[GRAPHIC OMITTED] Vice Chairman (since 2004 None None
2004) of the Board of
Vincent J. Esposito the Fund; Managing
(48)* Director, DeAM (since
c/o Deutsche Investment 2003). Vice President of
Management Americas Inc. Central European Equity
345 Park Avenue Fund, Inc. (since 2003);
New York, NY 10154 Vice President of The
Germany Fund, Inc.
(since 2003); Vice
President of The New
Germany Fund, Inc.
(since 2003) (registered
investment companies).
Mr. Esposito serves on
the boards of three
other funds managed by
DeIM. Managing Director,
Putnam Investments
(1991-2002).
-------------------------------------------------------------------------------------------------------------
2
Class I -- Nominees to serve until 2007 Annual Meeting of Stockholders
(continued):
Present Office with the Dollar Range
Fund, if any; Principal of Equity
Occupation or Employment Year Securities in Dollar Range of Equity
Name (Age) and Directorships First the Fund as Securities in All Funds Overseen
Address in Publicly Held Became a of June 30, by Director in Family of Funds
Independent Director** Companies Director 2004^1 as of June 30, 2004^1
-------------------------------------------------------------------------------------------------------------
[GRAPHIC OMITTED] Vice President, Council 2001 $1-$10,000 $1-$10,000
of the Americas; Vice
Susan Kaufman President, Americas
Purcell (62) Society; For-Profit
c/o Deutsche Corporate Boards:
Investment Director, Valero Energy
Management Corporation; Non-Profit
Americas Inc. Directorships: Freedom
345 Park Avenue House, Foundation for
New York, NY 10154 Management Education in
Central America (FMECA)
and National Endowment
for Democracy (until
1999) and Women's
Foreign Policy Group
(1999-Jan. 2004);
Member, Advisory Board,
The Inter-American
Foundation; and Member,
Council on Foreign
Relations; Previously
Member, Policy Planning
Staff, US Department of
State and Associate
Professor of Political
Science, University of
California, Los Angeles
(UCLA). Dr. Purcell
serves on the boards of
three other funds
managed by DeIM.
-------------------------------------------------------------------------------------------------------------
3
Information Concerning Continuing Directors
The Board of Directors is divided into three classes, with each Director serving
for a term of three years. The terms of Classes II and III Directors do not
expire this year. The following table sets forth certain information regarding
the Directors in such classes. Unless otherwise noted, each Director has engaged
in the principal occupation listed in the following table for more than five
years, but not necessarily in the same capacity. It is currently anticipated
that Messrs. Callander and Luers will resign from the Board on or about April
30, 2005 in accordance with the Boards' retirement policy.
Class II -- Directors to serve until 2005 Annual Meeting of Stockholders:
Present Office with the Dollar Range
Fund, if any; Principal of Equity
Occupation or Employment Year Securities in Dollar Range of Equity
Name (Age) and Directorships First the Fund as Securities in All Funds Overseen
Address in Publicly Held Became a of June 30, by Director in Family of Funds
Independent Directors** Companies Director 2004^1 as of June 30, 2004^1
-------------------------------------------------------------------------------------------------------------
[GRAPHIC OMITTED] Chairman (since 2004) 1996 $10,001- $50,001-$100,000
of the Board of the $50,000
Robert J. Callander Fund; Retired Vice
(73) Chairman, Chemical
c/o Deutsche Banking Corporation;
Investment Directorships: ARAMARK
Management Corporation (food
Americas Inc. service); Member,
345 Park Avenue Council on Foreign
New York, NY 10154 Relations; Previously
Visiting Professor/Executive
-in-Residence,
Columbia University
Business School;
Formerly, Director,
Barnes Group, Inc.
(manufacturing) (until
April 2001) and
Director, Metropolitan
Opera Association
(retired). Mr. Callander
serves on the boards of
three other funds
managed by DeIM.
-------------------------------------------------------------------------------------------------------------
4
Class II -- Directors to serve until 2005 Annual Meeting of Stockholders
(continued):
Present Office with the Dollar Range
Fund, if any; Principal of Equity
Occupation or Employment Year Securities in Dollar Range of Equity
Name (Age) and Directorships First the Fund as Securities in All Funds Overseen
Address in Publicly Held Became a of June 30, by Director in Family of Funds
Independent Directors** Companies Director 2004^1 as of June 30, 2004^1
-------------------------------------------------------------------------------------------------------------
[GRAPHIC OMITTED] President and Chief 2001 $1-$10,000 $10,001-$50,000
Executive Officer,
William H. Luers (75) United Nations
c/o Deutsche Investment Association of U.S.A.;
Management Director, Wickes Lumber
Americas Inc. Company (building
345 Park Avenue materials), America
New York, NY 10154 Online Latin America,
and Rubin Art Museum
(Asian art museum)
(2003-present); Member:
Advisory Board, The
Trust for Mutual
Understanding and
Christie's Inc. (art
auction house)
(2003-present);
Trustee: Rockefeller
Brothers Fund, Trustee
Advisory Council --
Appeal of Conscience
Foundation; formerly,
President, Metropolitan
Museum of Art
(1986-1999) (retired),
Director, StoryFirst
Communications, Inc.
(owns television and
radio stations in
Russia and Ukraine)
(1996-1999), The
Eurasia Foundation
(2000-2002), IDEX
Corporation (liquid
handling equipment
manufacturer)
(1991-2003); Member,
Executive Committee and
Board of Directors,
East-West Institute
(1988-2002). Mr. Luers
serves on the boards of
three other funds
managed by DeIM.
-------------------------------------------------------------------------------------------------------------
5
Class II -- Directors to serve until 2005 Annual Meeting of Stockholders
(continued):
Present Office with the Dollar Range
Fund, if any; Principal of Equity
Occupation or Employment Year Securities in Dollar Range of Equity
Name (Age) and Directorships First the Fund as Securities in All Funds Overseen
Address in Publicly Held Became a of June 30, by Director in Family of Funds
Independent Directors** Companies Director 2004^1 as of June 30, 2004^1
-------------------------------------------------------------------------------------------------------------
[GRAPHIC OMITTED] Professor (formerly 1994^2 None None
Dean, 1999-2001),
Kesop Yun (59) College of Business
c/o Deutsche Investment Administration, Seoul
Management National University,
Americas Inc. Seoul, Korea;
345 Park Avenue Director, The Korea
New York, NY 10154 Liberalisation Fund,
Inc. (U.K.)
(1996-1999); Visiting
Professor of London
Business School
(1997-1998); President,
Korea Securities &
Economy Institute
(1994-1995) and Korea
Tax Association
(1994-1995). Mr. Yun
serves on the boards of
three other funds
managed by DeIM.
-------------------------------------------------------------------------------------------------------------
Class III -- Directors to serve until 2006 Annual Meeting of Stockholders:
Present Office with the Dollar Range
Fund, if any; Principal of Equity
Occupation or Employment Year Securities in Dollar Range of Equity
Name (Age) and Directorships First the Fund as Securities in All Funds Overseen
Address in Publicly Held Became a of June 30, by Director in Family of Funds
Independent Directors** Companies Director 2004^1 as of June 30, 2004^1
-------------------------------------------------------------------------------------------------------------
[GRAPHIC OMITTED] Clinical Professor of 2000 $10,001- $50,001-$100,000
Finance, NYU Stern $50,000
Kenneth C. Froewiss School of Business
(58) (1997-present); Member,
c/o Deutsche Finance Committee,
Investment Association for Asian
Management Studies (2002-present);
Americas Inc. Managing Director, J.P.
345 Park Avenue Morgan (investment
New York, NY 10154 banking firm)
(1984-1996).
Mr. Froewiss serves on
the boards of three
other funds managed
by DeIM.
-------------------------------------------------------------------------------------------------------------
6
Class III-- Directors to serve until 2006 Annual Meeting of Stockholders
(continued):
Present Office with the Dollar Range
Fund, if any; Principal of Equity
Occupation or Employment Year Securities in Dollar Range of Equity
Name (Age) and Directorships First the Fund as Securities in All Funds Overseen
Address in Publicly Held Became a of June 30, by Director in Family of Funds
Independent Directors** Companies Director 2004^1 as of June 30, 2004^1
-------------------------------------------------------------------------------------------------------------
[GRAPHIC OMITTED] Director and Chief 2000 $50,001- Over $100,000
Executive Officer, IMF $100,000
Ronaldo A. da Frota Editora Ltd. (financial
Nogueira (66) publisher); Chairman of
c/o Deutsche Investment the Certification
Management Committee and Director,
Americas Inc. APIMEC Nacional
345 Park Avenue (Brazilian Association
New York, NY 10154 of Investment
Professionals and
Analysts); Member,
Board of the
Association of
Certified International
Investment Analysts
(ACIIA). Mr. Nogueira
serves on the boards of
three other funds
managed by DeIM.
-------------------------------------------------------------------------------------------------------------
All Directors and Officers as a group 8,150 Shares Less than 1/4 of 1% of Shares of
the Fund
-------------------------------------------------------------------------------------------------------------
* Director considered by the Fund and its counsel to be an "interested
person" (which as used in this proxy statement is as defined in the
Investment Company Act of 1940, as amended) of the Fund or of the Fund's
investment manager, DeIM, or the Fund's subadvisor, Deutsche Investment
Trust Management Company Limited (the "Korean Advisor"). Mr. Esposito is
deemed to be an interested person because of his affiliation with the
Fund's investment manager, DeIM.
** Directors considered by the Fund and its counsel not to be "interested
persons" of the Fund, the Fund's investment manager, DeIM, or the Korean
Advisor.
^1 The information as to beneficial ownership is based on statements furnished
to the Fund by the Directors and nominees. Unless otherwise noted,
beneficial ownership is based on sole voting and investment power.
^2 Mr. Yun previously served on the Board of the Fund from 1984 to 1988.
7
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and Section 30(h) of the Investment Company Act of 1940, as amended (the
"1940 Act"), as applied to a closed-end management investment company, require
the Fund's Officers and Directors, investment manager, investment advisor,
affiliates of the Fund's investment manager and investment advisor, and persons
who beneficially own more than ten percent of a registered class of the Fund's
outstanding securities ("Reporting Persons"), to file reports of ownership of
the Fund's securities and changes in such ownership with the Securities and
Exchange Commission (the "SEC"). Such persons are required by SEC regulations to
furnish the Fund with copies of all such filings.
Based on a review of reports filed by the Fund's directors and executive
officers, the Investment Manager, officers and directors of the Investment
Manager, affiliated persons of the Investment Manager and beneficial holders of
10% or more of the Fund's outstanding stock, and written representations by the
Reporting Persons that no year-end reports were required for such persons, all
filings required by Section 16(a) of the Exchange Act for the fiscal year ended
June 30, 2004 were timely. As a convenience to the Directors, the Investment
Manager assists the Directors in making their Section 16 filings.
According to Schedule 13D/A filings made with the SEC in May 2004 and July 2004,
respectively, the following owned beneficially more than 5% of the Fund's
outstanding stock:
Name and Address of Amount and nature of
Title of Class Beneficial Owner beneficial ownership Percent of class
--------------------------------------------------------------------------------------------------------
Common Stock President and Fellows of 9,924,971 shares^1 22.2%
Harvard College, c/o Harvard
Management Company, Inc., 600
Atlantic Ave., Boston, MA
02210
Common Stock City of London Investment 4,250,282 shares^2 9.51%
Group, PLC, c/o City of
London Investment Management
Company, Limited, 10
Eastcheap,
London, EC3M ILX, England
--------------------------------------------------------------------------------------------------------
^1 President and Fellows of Harvard College held sole voting power and sole
investment power with respect to the above number of shares.
^2 City of London Investment Group, PLC held sole voting power and sole
investment power with respect to the above number of shares. City of London
Investment Group, PLC held 4,222,262 of these shares, or 9.44% of the
Fund's outstanding stock, through its control of City of London Investment
Management Company Limited.
Except as noted above, to the best of the Fund's knowledge, as of July 31, 2004,
no other person owned beneficially more than 5% of the Fund's outstanding stock.
8
Honorary Directors
Mr. Wilson Nolen serves as an Honorary Director of the Fund. Honorary Directors
are invited to attend all Board meetings and to participate in Board
discussions, but are not entitled to vote on any matter presented to the Board.
Mr. Nolen served as a Director of the Fund from 1984 to 2000. Messrs. Tai Ho
Lee, Sidney Robbins and Robert W. Lear, who were directors when the Fund began
operations in 1984, serve as Emeritus Founding Directors of the Fund.
Committees of the Board -- Board Meetings
The Board of Directors of the Fund met thirteen times during the fiscal year
ended June 30, 2004. Each Director attended at least 75% of the total number of
meetings of the Board of Directors and of all committees of the Board on which
he or she served as a regular member.
The Board of Directors seeks to have at least a majority of its members present
at annual stockholder meetings. At the Fund's last annual stockholder meeting on
October 1, 2003, all Directors except Mr. Yun attended in person, and Mr. Yun
attended by telephone.
The Board of Directors, in addition to an Executive Committee, has an Audit
Committee, a Valuation Committee and a Committee on Independent Directors.
Audit Committee
The Board has an Audit Committee, consisting of those Directors who are not
interested persons of the Fund or of the Investment Manager ("Independent
Directors") as defined in the 1940 Act, which met five times during the fiscal
year ended June 30, 2004. The members of the Audit Committee are independent, as
independence is defined in the listing standards of the New York Stock Exchange,
Inc. In addition to approving the selection, retention, compensation and
termination of the Fund's independent registered public accounting firm, the
Audit Committee reviews with management and the independent registered public
accounting firm for the Fund, among other things, the scope of the audit and the
controls of the Fund and its agents, reviews and discusses with management the
Fund's annual audited financial statements, reviews the independent registered
public accounting firm's required communications regarding the scope and results
of the audit that may assist the Audit Committee in overseeing management's
financial reporting and disclosure process, reviews and approves in advance the
type of services to be rendered by the independent registered public accounting
firm, recommends to the Board for its approval the selection of the independent
registered public accounting firm, reviews matters related to the independence
of the Fund's independent registered public accounting firm and in general
considers and reports to the Board on matters regarding the Fund's accounting
and bookkeeping practices.
9
Audit Committee's Pre-Approval Policies and Procedures. The Audit Committee must
approve the engagement of the independent registered public accounting firm to
provide audit or non-audit services to the Fund and non-audit services to DeIM
or its control affiliates that relate directly to the Fund's operations and
financial reporting prior to the commencement of any such engagement. In
addition, the independent registered public accounting firm must notify the
Fund's Audit Committee not later than the Audit Committee's next meeting if the
independent registered public accounting firm enters into an engagement to
provide audit or non-audit-related services to DeIM or its control affiliates
that are not for services to the Fund or services that relate directly to the
Fund's operations and financial reporting whose projected fees are in excess of
$25,000. Such notification must include a general description of the services
awarded, the entity that is to be the recipient of such services, the timing of
the engagement, the entity's reason for selecting the independent accounts, and
the projected fees.
The Audit Committee's duties are described in the Audit Committee's charter,
which was adopted by the Board of Directors and which is attached to this Proxy
Statement as Appendix A.
At a meeting held on July 7, 2004, the Audit Committee and the Board of
Directors of the Fund, including a majority of the Independent Directors,
selected PricewaterhouseCoopers LLP to act as the independent registered public
accounting firm for the Fund for the fiscal year ending June 30, 2005. The
Fund's financial statements for the fiscal years ended June 30, 2004 and June
30, 2003 and for the six-month periods ended December 31, 2003 and December 31,
2002 were audited by PricewaterhouseCoopers LLP. The following table sets forth
the aggregate fees billed for professional services rendered by
PricewaterhouseCoopers LLP:
Audit-Related Fees Non-Audit Fees
-------------------------------------------------------------------------------------------------------------
Fiscal Year
Ended Audit Fees^1 Tax Fees Fund DeIM-Related Fund DeIM-Related
-------------------------------------------------------------------------------------------------------------
June 30, 2003 $122,020 $10,700 $1,205 $537,013 $0 $6,266,836
-------------------------------------------------------------------------------------------------------------
June 30, 2004 $102,500 $11,300 $185 $807,051 $0 $1,733,593
-------------------------------------------------------------------------------------------------------------
^1 The aggregate audit fees billed by PricewaterhouseCoopers to all funds
registered under the 1940 Act and managed by DeIM-related entities for each
of the Fund's last two fiscal years were $4,314,600 for the fiscal year
ended June 30, 2003 and $4,738,759 for the fiscal year ended June 30, 2004.
10
The fees disclosed in the table above under the caption "Audit Fees" are the
aggregate fees billed for each of the last two fiscal years for professional
services rendered for the audits of the Fund's annual and semi-annual financial
statements and review of financial statements included in the registrant's N-CSR
and for services that are normally provided by the independent registered public
accounting firm in connection with statutory and regulatory filings or
engagements for those fiscal years. The fees disclosed under the caption
"Audit-Related Fees" are the aggregate fees billed in each of the last two
fiscal years for assurance and related services that are reasonably related to
the performance of the audit or review of the Fund's financial statements and
are not reported under "Audit Fees." "Tax Fees" are the aggregate fees billed in
each of the last two fiscal years for professional services rendered for tax
compliance and tax return preparation. "Non-Audit Fees" are the aggregate fees
billed in each of the last two fiscal years for products and services provided,
other than the services described above. "Non-Audit Fees" were billed for
services in connection with risk management, tax services and process
improvement/integration initiatives for DeIM and other related entities that
provide support for the operations of the Fund. "DeIM-Related Fees" includes
fees billed for services, if any, in each of the last two fiscal years to DeIM
and all entities controlling, controlled by, or under common control with DeIM
that provide ongoing services to the Fund. For engagements entered into on or
after May 6, 2003, the Audit Committee pre-approved all non-audit services that
PricewaterhouseCoopers LLP provided to DeIM and DeIM-related entities that
related directly to the Fund's operations and financial reporting.
The aggregate non-audit fees billed by PricewaterhouseCoopers LLP to the Fund,
DeIM and entities controlling, controlled by or under common control with DeIM
that provide services to the Fund for each of the Fund's last two fiscal years
were $6,266,836 for the fiscal year ended June 30, 2003 and $1,733,593 for the
fiscal year ended June 30, 2004. The Fund's Audit Committee gave careful
consideration to the non-audit related services provided by
PricewaterhouseCoopers LLP to the Fund, DeIM and entities controlling,
controlled by or under common control with DeIM that provide ongoing services to
the Fund, and, based in part on certain representations and information provided
by PricewaterhouseCoopers LLP, determined that the provision of these services
was compatible with maintaining PricewaterhouseCoopers LLP's independence.
Representatives of PricewaterhouseCoopers LLP are not expected to be present at
the Meeting, but will be available by telephone to respond to appropriate
questions and to make a statement if they wish to do so.
11
Audit Committee Report
In connection with the audited financial statements as of and for the fiscal
year ended June 30, 2004 included in the Fund's Annual Report for the fiscal
year ended June 30, 2004 (the "Annual Report"), at a meeting held on August 18,
2004, the Audit Committee considered and discussed the audited financial
statements with management and the independent registered public accounting
firm, and discussed the audit of such financial statements with the independent
registered public accounting firm.
The Audit Committee also discussed with the independent registered public
accounting firm the matters required to be discussed by Statement On Auditing
Standards No. 61 (Communications with Audit Committees). The independent
registered public accounting firm provided to the committee the written
disclosure and the letter required by Independence Standards Board Standard No.
1 (Independence Discussions with Audit Committees), and the Audit Committee
discussed with representatives of the independent registered public accounting
firm their firm's independence.
The members of the Audit Committee are not professionally engaged in the
practice of auditing or accounting and are not employed by the Fund for
accounting, financial management or internal control. Moreover, the Audit
Committee relies on and makes no independent verification of the facts presented
to it or representations made by management or the independent accountants.
Accordingly, the Audit Committee's oversight does not provide an independent
basis to determine that management has maintained appropriate accounting and
financial reporting principles or policies, or internal controls and procedures,
designed to assure compliance with accounting standards and applicable laws and
regulations. Furthermore, the Audit Committee's considerations and discussions
referred to above do not provide assurance that the audit of the Fund's
financial statements has been carried out in accordance with the standards of
the Public Company Accounting Oversight Board (United States) or that the
financial statements are presented in accordance with accounting principles
generally accepted in the United States of America.
Based on its consideration of the audited financial statements and the
discussions referred to above with management and the independent registered
public accounting firm and subject to the limitation on the responsibilities and
role of the Audit Committee set forth in the Audit Committee's Charter and those
discussed above, the Audit Committee of the Fund recommended to the Board of
Directors of the Fund that the audited financial statements be included in the
Fund's Annual Report.
The Audit Committee consists of Messrs. Froewiss (Chairman), Callander, Luers,
Nogueira and Yun, and Dr. Purcell.
12
Committee on Independent Directors
The Board has a Committee on Independent Directors consisting of the Independent
Directors. The Committee met twice during the fiscal year ended June 30, 2004.
The primary purposes and responsibilities of the Committee are (i) to identify
individuals qualified to become members of the Board in the event that a
position is vacated or created; (ii) to recommend for the Board's selection the
Director nominees for the next annual meeting of stockholders; (iii) to set any
necessary standards or qualifications for service on the Board; (iv) to review
and evaluate the compensation practices of the Independent Directors and to
recommend any changes thereto to the Board; (v) to determine the policies
governing retirement of all Independent Directors; (vi) to perform periodic
evaluations of the effectiveness of the Independent Directors; and (vii) to
consider such other matters of special relevance to the Independent Directors.
The Committee met on April 7, 2004 to recommend the nominees for Independent
Directors presented in this proxy statement.
The Committee on May 10, 2004 met to recommend successors to fill vacancies that
would be created when Richard Hale, in connection with his forthcoming
retirement from the Investment Manager, submitted his resignation as a Class I
Director and Chairman of the Board of the Fund. To fill these vacancies, at the
recommendation of the Committee, the Board elected Mr. Callander, the Chairman
of the Committee on Independent Directors, as Chairman of the Board. The Board
believes that its election of an Independent Director as Chairman reaffirms the
Board's long-standing commitment to strong, independent oversight of the Fund's
operations, and to progressive governance practices that seek to protect and
serve the interests of all Fund stockholders. At the Committee's recommendation,
the Board also appointed Mr. Esposito as a director in Class I and as Vice
Chairman of the Board.
The Committee requires that Director candidates have a college degree or
equivalent business experience. The Committee may take into account a wide
variety of factors in considering Director candidates, including (but not
limited to): (i) availability and commitment of a candidate to attend meetings
and perform his or her responsibilities on the Board, (ii) relevant industry and
related experience, (iii) educational background, (iv) financial expertise, (v)
an assessment of the candidate's ability, judgment and expertise and (vi)
overall diversity of the Board's composition.
The Board of Directors has adopted a written charter for the Committee on
Independent Directors, which is attached to this Proxy Statement as Appendix B.
The Committee will consider and evaluate nominee candidates properly submitted
by stockholders on the same basis as it considers and evaluates candidates
recommended by other sources. Appendix A to the charter (which is part of
Appendix B hereto), as it may be amended from time to time by the Committee,
sets forth procedures that must be followed by stockholder to properly submit a
nominee candidate to the Committee. Recommendations not properly submitted in
accordance with Appendix A to the charter will not be considered by the
Committee. In order to be considered by the Committee for the 2005 annual
meeting, a submission should be made by April 22, 2005.
13
Executive Committee
The Executive Committee is empowered, and the Directors have delegated to such
Committee, all of the powers of the Directors that are not otherwise delegated
and that may lawfully be exercised by an executive committee. The Executive
Committee is authorized to act when the full Board of Directors is not in
session. Messrs. Callander, Esposito and Froewiss are members of the Executive
Committee. The Executive Committee did not meet during the fiscal year ended
June 30, 2004.
Valuation Committee
The Valuation Committee monitors the valuation of portfolio securities and other
investments and, as required by the Fund's valuation policies when the full
Board is not in session, determines the fair value of certain illiquid and other
portfolio holdings after consideration of all relevant factors, which
determinations are reported to the full Board. Messrs. Callander, Esposito and
Froewiss are the members of the Valuation Committee, with Mr. Luers as an
alternate. The Valuation Committee met once during the fiscal year ended June
30, 2004.
Stockholder Communications with Directors
The Fund has established procedures for stockholders to send communications to
the Board of Directors. Communications should be sent in writing to the Board of
Directors of The Korea Fund, Inc., c/o John Millette, Secretary to the Fund, 345
Park Avenue, New York, New York 10154. The Secretary of the Fund then will
promptly forward copies of all written correspondence to the Directors.
14
Executive Officers
The following persons are Executive Officers of the Fund:
Present Office with the Fund; Year First Became
Name (Age) Principal Occupation or Employment^1 an Officer^2
-----------------------------------------------------------------------------------------------------------
Julian F. Sluyters (44) President and Chief Executive Officer; Managing 2004
Director, Deutsche Asset Management (since May 2004);
President and Chief Executive Officer of The Brazil
Fund, Inc., Scudder Global High Income Fund, Inc. and
Scudder New Asia Fund, Inc. (since May 2004); Chief
Executive Officer of the Scudder Funds (203 funds);
President and Chief Executive Officer, UBS Fund Services
(2001-2003); Chief Administrative Officer (1998-2001)
and Senior Vice President and Director of Mutual Fund
Operations (1991-1998) UBS Global Asset Management.
Kate Sullivan D'Eramo (47) Assistant Treasurer; Director of Deutsche Asset 2003
Management.
Kevin M. Gay (44) Assistant Treasurer; Vice President of Deutsche Asset 2004
Management (since 2002); prior thereto, a Vice President
and Director of PFPC, Inc. or its predecessor
organization (1994-2002).
John J. Lee (46) Vice President; Managing Director of Deutsche Asset 1994
Management.
John Millette (41) Vice President and Secretary; Director of Deutsche Asset 1999
Management.
Caroline Pearson (42) Assistant Secretary; Managing Director of Deutsche Asset 1998
Management.
Charles A. Rizzo (47) Treasurer and Chief Financial Officer; Managing Director 2002
(since 2004) and Director (2000-2004) of Deutsche Asset
Management; prior thereto, Vice President and Department
Head, BT Alex. Brown Incorporated (now Deutsche Bank
Securities Inc.) (1998-1999); Senior Manager, Coopers
and Lybrand L.L.P. (now PricewaterhouseCoopers LLP)
(1993-1998).
Bruce A. Rosenblum (43) Vice President and Assistant Secretary; Director (since 2002
2002) and Vice President (2000-2002) of Deutsche Asset
Management; prior thereto, partner with the law firm of
Freedman, Levy, Kroll & Simonds (1994-1999).
Salvatore Schiavone (38) Assistant Treasurer; Director of Deutsche Asset 2003
Management.
-----------------------------------------------------------------------------------------------------------
^1 Unless otherwise stated, all Executive Officers have been associated with
DeIM, Deutsche Asset Management, or predecessor organizations for more than
five years, although not necessarily in the same capacity. Messrs.
Esposito, Lee, Millette, Rizzo, Rosenblum and Schiavone and Mses. D'Eramo
and Pearson own securities of Deutsche Bank AG.
^2 The President, Treasurer and Secretary each hold office until the next
annual meeting of the Board of Directors and until his successor has been
duly elected and qualifies, and all other officers hold office in
accordance with the bylaws of the Fund.
15
Transactions with and Remuneration of Directors and Officers
The aggregate direct remuneration incurred by the Fund for payment to
Independent Directors was $183,000, including expenses, for the fiscal year
ended June 30, 2004. Each such Independent Director currently receives fees,
paid by the Fund, of $750 per Directors' meeting attended and an annual fee of
$6,000, except the Chairman of the Board (currently Mr. Callander), who receives
an annual fee of $18,000 effective May 10, 2004. Prior to May 10, 2004, Mr.
Callander received an annual Director's fee of $6,000 plus an additional $2,500
annual fee for having served as the Lead Independent Director of the Independent
Directors. The Chairman of the Audit Committee (currently Mr. Froewiss) receives
an additional $2,500 annual fee for serving in that capacity. Each Independent
Director also receives $250 per committee meeting attended (other than audit
committee meetings and meetings held for the purpose of considering arrangements
between the Fund and the Investment Manager or an affiliate of the Investment
Manager, for which such Director receives a fee of $750). DeIM supervises the
Fund's investments, pays the compensation and certain expenses of its personnel
who serve as Directors and Officers of the Fund, and receives a management fee
for its services. Several of the Fund's Officers and Directors are also
officers, directors, employees or stockholders of DeIM and participate in the
fees paid to that firm (see "The Investment Manager," page 33), although the
Fund makes no direct payments to them.
The following Compensation Table provides, in tabular form, the following data:
Column (1) All Directors who receive compensation from the Fund.
Column (2) Aggregate compensation received by a Director from the Fund.
Columns (3) and (4) Pension or retirement benefits accrued or proposed to be
paid by the Fund. The Fund does not pay such benefits to its Directors.
Column (5) Total compensation received by a Director from the Fund, plus
compensation received from all funds managed by DeIM for which a Director
serves. The total number of funds from which a Director receives such
compensation is also provided in column (5). Generally, compensation received by
a Director for serving on the Board of a closed-end fund is greater than the
compensation received by a Director for serving on the Board of an open-end
fund.
16
Compensation Table for the year ended December 31, 2003
------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
Aggregate Compensation
as a Director/Trustee
of the Fund and Other
Pension or Scudder Funds
Aggregate Retirement Benefits Estimated Annual
Name of Person Compensation Accrued as Part of Benefits Upon Paid by Paid by
Position from the Fund Fund Expenses Retirement Funds DeIM*
------------------------------------------------------------------------------------------------------------
Robert J. Callander, $18,500 N/A N/A $64,250 $3,000*
Director (4 funds)
Kenneth C. Froewiss, $18,500 N/A N/A $65,750 $3,000*
Director (4 funds)
William H. Luers, $16,000 N/A N/A $55,750 $3,000*
Director (4 funds)
Ronaldo A. da Frota $16,000 N/A N/A $61,750 $3,000*
Nogueira, Director (4 funds)
Susan Kaufman Purcell, $15,250 N/A N/A $53,500 $3,000*
Director (4 funds)
Kesop Yun, $14,500 N/A N/A $54,250 $3,000*
Director (4 funds)
------------------------------------------------------------------------------------------------------------
* DeIM paid the fees of Independent Directors for attendance at a meeting to
discuss and approve the delegation of certain fund accounting and related
services to State Street Bank and Trust Company.
Required Vote
Election of each of the listed nominees for Director requires the affirmative
vote of the holders of a majority of the shares present in person or by proxy
and entitled to vote thereon. If a nominee does not receive the required vote,
the director holding over shall continue as a director until his or her
successor is elected and qualifies. Your Fund's Directors recommend that
stockholders vote FOR each of the listed nominees.
The Investment Manager
Under the supervision of the Board of Directors of the Fund, DeIM, with
headquarters at 345 Park Avenue, New York, New York, makes the Fund's investment
decisions, buys and sells securities for the Fund and conducts research that
leads to these purchase and sales decisions. DeIM and its predecessors have more
than 80 years of experience managing mutual funds and provide a full range of
investment advisory services to institutional and retail clients. The Fund's
investment advisor is also responsible for selecting brokers and dealers and for
negotiating brokerage commissions and dealer charges.
17
Deutsche Asset Management is the marketing name in the U.S. for the asset
management activities of Deutsche Bank AG, DeIM, Deutsche Asset Management Inc.,
Deutsche Asset Management Investment Services Ltd., Deutsche Bank Trust Company
Americas and Scudder Trust Company. Deutsche Asset Management is a global asset
management organization that offers a wide range of investing expertise and
resources, including hundreds of portfolio managers and analysts and an office
network that reaches the world's major investment centers. This well-resourced
global investment platform brings together a wide variety of experience and
investment insight across industries, regions, asset classes and investing
styles. DeIM is an indirect wholly owned subsidiary of Deutsche Bank AG.
Deutsche Bank AG is a major global banking institution that is engaged in a wide
range of financial services, including investment management, mutual fund,
retail, private and commercial banking, investment banking and insurance.
The Investment Manager, the predecessor of which is Scudder, Stevens & Clark,
Inc. ("Scudder"), is one of the most experienced investment counseling firms in
the U.S. It was established as a partnership in 1919 and pioneered the practice
of providing investment counsel to individual clients on a fee basis. In 1928 it
introduced the first no-load mutual fund to the public. In 1953, Scudder
introduced Scudder International Fund, Inc., the first mutual fund available in
the U.S. investing internationally in securities of issuers in several foreign
countries. The predecessor firm reorganized from a partnership to a corporation
on June 28, 1985. On December 31, 1997, Zurich Insurance Company ("Zurich")
acquired a majority interest in Scudder, and Zurich Kemper Investments, Inc., a
Zurich subsidiary, became part of Scudder. Scudder's name changed to Scudder
Kemper Investments, Inc. On January 1, 2001, the Investment Manager changed its
name from Scudder Kemper Investments, Inc. to Zurich Scudder Investments, Inc.
On April 5, 2002, 100% of the Investment Manager was acquired by Deutsche Bank
AG and the Investment Manager changed its name to Deutsche Investment Management
Americas Inc.
DeIM is a Delaware corporation. Evelyn Tresset, 280 Park Avenue, New York, NY
10017, is a Director and Chief Operating Officer; William N. Shiebler, 280 Park
Avenue, New York, NY 10017, is a Director, President and Chief Executive
Officer; Jeffrey S. Wallace, 280 Park Avenue, New York, NY 10017, is a Director,
Chief Financial Officer and Treasurer; A. Thomas Smith, 1251 Avenue of the
Americas, New York, NY 10020, is Secretary and Chief Legal Officer; Stephen R.
Burke and Thomas F. Eggers, each of 1325 Avenue of the Americas, New York, NY
10019, Leo P. Grohowski, 345 Park Avenue, New York, NY 10154 and Gloria S.
Nelund, 300 South Grand Avenue, Los Angeles, CA 90071, each is an Executive Vice
President; and Philip W. Gallo, 1251 Avenue of the Americas, New York, NY 10020,
is the Chief Compliance Officer.
18
The Subadvisor
On April 3, 2002, the Directors of the Fund approved a Research and Advisory
Agreement between DeIM and the Korean Advisor, a wholly owned subsidiary of
Deutsche Bank, which serves as subadvisor to the Fund. The address of the Korean
Advisor and the principal business address of each director and principal
officer, as it relates to his or her duties at the Korean Advisor, is 19F,
Youngpoong Building, 33, Seorin-Dong, Chongro-ku, Seoul, Korea 110-752. The
Korean Advisor is registered with the SEC as an investment advisor under the
Investment Advisers Act of 1940, as amended, and began serving as subadvisor to
the Fund on July 9, 2002. The Korean Advisor renders investment advisory and
management services with regards to that portion of the Fund's portfolio
allocated to the Korean Advisor by DeIM.
The principal occupations of each director and principal executive officer of
the Korean Advisor are set forth below. No Directors or officers of the Fund are
employees, officers, directors or shareholders of the Korean Advisor.
Position with the Korean
Advisor and
Name Principal Occupation
--------------------------------------------------------------------------------
Yong-Il Shin Director
Chang-Geun Nam Director
Jae-Heon Lee Director
Jin-Kwon Chung Director
--------------------------------------------------------------------------------
PROPOSAL 2: STOCKHOLDER PROPOSAL
The Fund's Independent Directors unanimously oppose, and urge all stockholders
to vote AGAINST, Proposal 2. The Independent Directors believe Proposal 2 is
contrary to the best interests of the Fund.
The President and Fellows of Harvard College has submitted the following
proposal for inclusion in this proxy statement:
That the investment management agreement, between the Fund and Deutsche
Investment Management Americas Inc., as currently in effect on the date hereof,
be terminated immediately.
STATEMENT:
President and Fellows of Harvard College ("Harvard") has been a shareholder of
the Fund for more than 4 years. We currently own almost 10 million shares, more
than 22.2% of the Fund. We have communicated with Deutsche Investment Management
Americas, Inc. ("DeIM"), the Funds manager, several times regarding the discount
of the Fund's shares from their net asset value. Last December, we met with the
Fund's Board and representatives of DeIM. We discussed the discount and ways in
which the Fund might reduce or eliminate the discount. We believe that a large
discount is unacceptable, and that the Board has several viable alternatives to
reduce or eliminate the discount.
19
Instead of implementing one of these viable alternatives, early this year the
Fund announced a tender offer for up to 10% of its shares at 95% of its then
current net asset value, with a program for up to two additional similar tender
offers in the following years if the discount exceeded 15%. We believe this
program is totally inadequate and brings to light the severe conflicts that
exist between Fund shareholders and DeIM.
Had DeIM formulated a substantial tender offer for up to 50% or more of the
Fund's shares and made the offering price net asset value rather than a discount
from net asset value, we believe DeIM truly would have created value for
shareholders. That tender offer, however, also would have resulted in a loss in
fees for DeIM since its fees are based on the size of the Fund. Clearly, DeIM
chose preservation of its interests over the interests of shareholders. DeIM
could not have followed this path without the approval of the Fund's Board. We
ask why the Board has gone along with DeIM.
We believe the Fund's performance is ordinary when compared to Korean securities
indices, MSCI (Morgan Stanley Capital International), IFC (International Finance
Corporation) and KOSPI (Korea Composite Index). While rules of the Korean
securities markets under which the Fund operates limit its ability to repatriate
capital, DeIM has not made any effort to obtain relief from those rules. The
Korean securities market has matured exponentially since the inception of the
Fund. Harvard believes the Fund readily could have obtained relief from those
rules. Others have. Even with the rules, DeIM and the Board could have done much
better than the program they announced.
We believe that DeIM has undue influence over the Board and that shareholders
will not get management responsive to shareholder interests unless DeIM is
removed as the Fund's manager. Accordingly, Harvard has submitted a proposal to
terminate DeIM's investment management agreement with the Fund, effective
immediately. Upon the termination of the management agreement, DeIM's research
and advisory agreement with its subadvisor, Deutsche Investments Trust
Management Company Limited, shall automatically terminate in accordance with its
terms.
20
RESPONSE TO STOCKHOLDER PROPOSAL
Your Board of Directors opposes this proposal and urges you to vote AGAINST
Proposal 2 because the Board believes that the Fund has had excellent
performance under the Manager and that adoption of the proposal could harm the
Fund and your investment in the Fund:
THE FUND HAS HAD EXCELLENT PERFORMANCE UNDER THE MANAGER. The Fund has achieved
superior investment performance as an investor in Korean securities, consistent
with the Fund's objective of long-term capital appreciation through investments
in such securities. Your Directors -- only one of whom is affiliated with the
Investment Manager -- believe the Fund's strong investment results reflect the
skill and experience of the Investment Manager, its intimate knowledge of the
Korean market and its large research capability and other resources on the
ground in Korea. These attributes, coupled with the Fund's organization as a
closed-end fund, have helped the Fund invest early in small capitalization
stocks that have outperformed large capitalization stocks in Korea in each of
the last seven years, which in turn has boosted Fund performance. The Fund has
consistently outperformed its benchmark, the Korea Composite Index (the
"KOSPI"), and has outperformed its closed- and open-end fund peers in almost all
of the periods listed below.
The Korea Fund Inc.'s Superior Performance (As of June 30, 2004)
YTD
(cumulative) 1 Year 3 Year 5 Year 10 Year
--------------------------------------------------------------------------------
Korea 2.52 24.15 21.18 8.58 5.07
Fund*
--------------------------------------------------------------------------------
KOSPI .48 21.67 15.88 -1.29 -5.22
--------------------------------------------------------------------------------
Korea -3.85 26.44 17.59 -2.14 -5.79
Equity
Fund**
--------------------------------------------------------------------------------
Matthews 2.65 24.10 24.87 6.01 N/A
Korea***
--------------------------------------------------------------------------------
Fidelity -3.35 18.57 15.90 -1.64 N/A
Adv.
Korea-A***
--------------------------------------------------------------------------------
Source: Deutsche Asset Management; Bloomberg; Web Sites
* Information for all funds is based on net asset values.
** Closed-end fund
*** Open-end fund
The Fund also has a lower expense ratio than each of the funds listed above:
Fund Expense Ratio
--------------------------------------------------------------------------------
Fund Expense Ratio (%)
Korea Fund* 1.256
Korea Equity Fund** 2.53
Matthews Korea*** 1.50
Fidelity Adv. Korea-A** 1.99
--------------------------------------------------------------------------------
* For the year ended 12/31/03
** For the year ended 4/30/04
*** For the six months ended 2/29/04, on an annualized basis
21
THE FUND'S BOARD HAS TAKEN SUBSTANTIAL STEPS TO ADDRESS THE DISCOUNT. As the
Proponent, a frequent buyer and seller of shares of closed-end funds, is well
aware, there are no easy solutions to the discount to net asset value at which
shares of closed-end funds such as the Fund trade. How well investors have done
with their investment in the Fund is measured not by the discount, but by total
return on investment. By that measure, all stockholders have benefited from the
Fund's strong performance. Nonetheless, certain stockholders have expressed
concern about the discount. In response to such concerns, the Fund has taken
major steps to address the discount. These steps include:
o In 2001, a large special in-kind dividend. The Fund's stockholders received
in that dividend portfolio securities with a market value equal to 10% of
the Fund's total net assets at the time.
o Purchasing shares of the Fund pursuant to the Fund's Dividend Reinvestment
Plan and in other market purchases.
o In January and February 2004, the Fund successfully conducted a tender
offer for 10% of its outstanding shares at a price of 95% of net asset
value.
o At the same time, the Board approved a program of making additional
repurchase offers in the first quarter of 2005 and the first quarter of
2006. Each additional repurchase offer will be for 10% of the Fund's shares
at a price of 95% of net asset value and will be made, subject to fiduciary
and other applicable requirements, if the Fund's shares trade on the New
York Stock Exchange at an average weekly discount from net asset value
greater than 15% during a 13-week measuring period ending the preceding
December 31.
Contrary to the Proponent's assertion that the Investment Manager has undue
influence on the Board, the Board is overwhelmingly made up of Independent
Directors. Of the Fund's seven directors, all but one are unaffiliated with the
Fund's Manager. The Chairman of the Board is an Independent Director. The
Independent Directors are advised by their own counsel and meet separately with
their counsel each time that the Board meets. In adopting measures to address
the discount, the Board has considered the best interests of the Fund and its
stockholders -- not just the views of the Proponent.
The Board authorized the tender offer and the program for future tender offers
after a thorough special review, initiated in April 2003, of alternatives to
enable shareholders to realize value near net asset value for at least a portion
of their shares. During that review, the Independent Directors and the Board
considered, among other alternatives, whether it would be in the best interests
of the Fund to become an open-end fund, to convert to an interval fund making
regular large repurchases of shares, or to liquidate. The Independent Directors
and the Board also considered the Fund's record of performance under the
Manager, and the prospects for further growth through investment in Korean
equity securities.
The Board continues to monitor the discount and to consider ways to address it
that are in the best interests of the Fund and its stockholders.
22
PROPONENT'S INTERESTS DIFFER FROM THOSE OF OTHER STOCKHOLDERS. The Board has
welcomed and considered carefully the views of the Proponent. Indeed, the full
Board met with the Proponent to hear its views. At that meeting the Proponent -
which owns stock in many closed-end funds -- said that it had never previously
met with the full board of a closed-end fund in which it had invested.
The Board believes, however, that Proponent's interests differ in major respects
from the interests of other stockholders who have invested in the Fund
consistent with its objective of long-term capital appreciation.
The Proponent engages in arbitrage and hedging. As the President of the
Proponent's investment manager stated recently, "We look for mispricings among
similar securities, arbitrage-type situations."^1 In December 2003, the
Proponent told the Fund's Board in substance that, to the extent the Fund
invested in smaller cap stocks rather than in stocks included in the index, such
investments would cause "tracking errors" in the Proponent's hedging strategies
because the index was the Proponent's way of hedging its position in the Fund.
Yet as shown above, with the benefit of the Manager's investment experience and
skill, by including smaller-cap stocks in its portfolio the Fund has
consistently outperformed the Korea stock market index. The Investment Manager
believes that investing in smaller cap stocks, and investing in larger stocks in
ways that do not mirror their weighting in the index, have contributed
significantly to the Fund's strong investment performance.
In addition, the Proponent has suggested to the Fund that the Board approve a
tender offer, as the Proponent notes in its statement, for up to "50% or more of
the Fund's shares." It has also suggested that the Fund become an interval fund
and make regular tender offers for its shares. While these changes might assist
the Proponent in its arbitrage and hedging strategies, they could materially
harm the Fund and its stockholders interested in achieving the Fund's stated
investment objective of long-term capital appreciation through investing in
Korean securities. In the Board's view, possible adverse effects could include:
o The likely downward pressure on the value of portfolio securities and on the
Fund's net asset value if large percentages of the Fund's portfolio
securities were disposed of in a short period of time to fund any such
distributions and in a relatively illiquid market such as the Korea Stock
Exchange.
o The likely material increase in the Fund's expense ratio that would accompany
a large reduction in the Fund's assets. Example: Starting in 2002, The Mexico
Fund undertook large repurchases of its own shares after Harvard in 2000
announced its intent to submit a proposal to terminate that fund's investment
advisor. The fund's net assets fell from $940 million as of April 30, 2002 to
$270 million as of October 31, 2003. Its expense ratio rose from 1.45% to
1.92% in the same period.
o The probability that, unless repurchases of shares were paid for with
portfolio securities and the Fund were able to receive a favorable tax ruling
from the Internal Revenue Service, large share repurchases would involve the
realization of large capital gains by the Fund. That realization of capital
gains would generate taxable capital gains distributions to the Fund's
stockholders, as well as the need for additional capital gains distributions
to maintain the Fund's tax status as a registered investment company.
o The further increase in expense ratio likely to result from the further
reduction in the Fund's assets as a result of these additional gains
distributions.
o The adverse effect on the liquidity of the Fund's shares that could result
from a substantial reduction in the Fund's publicly traded shares.
23
TERMINATION OF THE MANAGER LIKELY WILL HARM THE FUND'S PERFORMANCE AND INCREASE
EXPENSES. The Board believes that the Manager has achieved superior investment
results for the Fund and its stockholders, and continues to be well qualified to
manage the Fund. The Independent Directors believe few investment managers have
experience and capabilities in researching and selecting investments in Korea
that are comparable with those of the Manager. There can be no assurance that a
new investment manager would be able to provide the excellent performance that
the Manager has been able to achieve.
Termination of the investment advisory agreement would not by itself result in
the elimination of the discount, and there is no evidence that it would
materially affect the discount in the long term. Many closed-end country funds
trade at a discount. The Board believes it is far more likely that termination
of the investment advisory agreement would harm the Fund and all of its
stockholders by causing significant uncertainty and disruption of the Fund's
investment process. That would likely harm the Fund's investment performance and
cause the Fund to incur significant additional and unnecessary expenses. These
results would be adverse to the interests of stockholders.
Upon termination of the agreement, the Board would have to make new investment
advisory arrangements, which would have to be approved by stockholders. That
would involve delays, uncertainties and large expenses, to the detriment of the
Fund and its stockholders. Additional expenses would include the costs
associated with holding special meetings of the Board of Directors, a special
meeting of the Fund's stockholders and increased charges by existing service
providers to accommodate the transition.
------------------
^1 See Karen W. Arenson, "Investment Gains Lift Endowments at Leading
Colleges," N.Y. TIMES, September 28, 2003, at 34.
The Board believes termination of the investment advisory agreement would
involve the certainty of harm to the Fund and its stockholders though disruption
and expense with no assurance whatsoever of any countervailing benefit - or
indeed of being able to find a manager as knowledgeable about investing in
Korean securities and as likely to deliver strong investment results as is the
Manager.
FOR THESE REASONS, THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE AGAINST
PROPOSAL 2.
Required Vote
Approval of the proposal requires the affirmative vote of holders of 67% of the
Fund's shares that are present at the meeting (in person or by proxy), if
holders of more than 50% of the outstanding voting shares of the Fund are
present at the meeting or represented by proxy or, if less, more than 50% of the
Fund's outstanding shares. Your directors recommend that you vote AGAINST the
proposal. Your proxy will be so voted unless you specify otherwise.
24
Dissident Nominations
The Mellon Trust of Delaware NA TTEE, Emerging Markets Country Fund ("Mellon"),
the record holder of Fund shares beneficially owned by City of London Investment
Management Company Limited ("CLIM"), has written the Fund that, at the
discretion of CLIM, it intends to nominate two persons for election as directors
of the Fund at the Annual Meeting. The Board urges you to vote AGAINST City of
London's proposed nominees. The Board believes the City of London proposed
nominees have interests that differ from those of other stockholders and are
less qualified than the Board's nominees to supervise the Fund. The Board urges
you to discard and not to sign or send in any proxy card City of London sends to
you.
City of London
Mellon is the record holder of shares of the Fund for certain entities related
to the City of London that, on February 17, 2004, filed a Schedule 13D with the
Securities and Exchange Commission reporting beneficial ownership of 6.95% of
the Fund's shares.
According to the Schedule 13D, the entities comprising the City of London group
are:
o CLIM is an emerging markets fund manager.
o CLIM is controlled by City of London Investment Group PLC ("CLIG" and
together with CLIM, "City of London" or "CL"). CLIG provides investment
advisory services to segregated accounts and various public and private
investment funds including the Emerging Markets Country Fund.
By letter dated July 8, 2004, Mellon informed the Fund of its intent to nominate
two persons for election as directors at the Annual Meeting: Julian Reid and
Chris Russell. Appendix C contains information furnished by Mellon about the
City of London nominees.
Performance of the Fund; Adverse Interests of the City of London
The Fund seeks long-term capital appreciation through investment primarily in
equity securities of Korean issuers. The Fund has done well for its stockholders
in pursuit of this investment objective, both over the calendar year 2003 and
over longer periods. The Fund has consistently outperformed its benchmark, the
KOSPI, and has outperformed its closed-end and open-end fund peers during most
periods for the past ten years. See "Response to Stockholder Proposal."
Your Board believes CL and its nominees may have interests and objectives that
differ dramatically from the Fund's investment objective, which is long-term
capital appreciation through investment in Korean equity securities. CL, in its
dealings with other closed-end funds, appears to be more interested in arbitrage
opportunities than achieving long term capital appreciation. For example:
o In 2002, CL helped to pressure the Asia Tigers Fund to adopt an interval-fund
structure when it filed a 13D stating that it would vote for a proposal by
Harvard to terminate the fund's investment advisor and that it might support
other proposals to open-end, liquidate, or convert the fund to interval
status. Since the Asia Tigers Fund has conducted quarterly tender offers, its
net assets fell from $139 million (as of April 30, 2002) to $88 million (as
of April 30, 2004); its expense ratio rose from 1.58% to 2.10%.
25
o CL also helped pressure India Growth Fund Inc. to liquidate in 2003 when it
filed a 13D stating that it believed the fund should commit to enhance
shareholder value by "whatever means necessary, ...(e.g., open-ending...,
liquidation, conversion to interval fund status, conversion to an index-based
exchange-traded fund..., termination of the investment management
agreement)."
Qualifications of the City of London Nominees
We believe that the City of London nominees are less well qualified than the
Fund's candidates to serve as directors of the Fund.
One City of London nominee, Julian Reid, lists as a principal occupation being
Chief Executive Officer of 3a Asset Management Ltd. 3a Asset Management is a
Mauritius company. Mr. Reid is Chairman and President of Saffron Fund (formerly
Jardine Fleming India Fund) which is proposing to be liquidated, in part because
of its high expense ratio (3.48% for the year ended November 2003). Mr. Reid has
also, since 1997, been a director of JF China Region Fund, Inc., which has
shrunk dramatically in size in a series of self tender offers and has undergone
a marked increase in its expense ratio, which was 2.54% -- more than twice that
of the Korea Fund -- for the year 2003.
The information submitted to the Fund by City of London does not indicate any
experience on the part of Mr. Reid or City of London's other nominee, Chris
Russell, with investing in Korean securities or being a director of a company
that invests primarily in Korea.
Risks of City of London's Program
Although CL has never clearly said what it wants the Fund to do, CL, in its 13D
of February 17, 2004 and its letter to the Fund dated February 27, 2004, appears
to be advocating large repurchases by the Fund of its own shares. We believe
that unduly large self-tenders would harm the Fund and its long-term investment
results in the ways listed in "Response to Stockholder Proposal," including
harming investment performance, adversely affecting market prices of the Fund's
portfolio securities, increasing taxes of Fund stockholders, and increasing the
Fund's expense ratio.
In its February 13D, CL also suggests the Board should consider the alternative
of liquidating the Fund. In our view, liquidating the Fund -- while it might
benefit arbitrageurs -- would not be in the best interests of Fund shareholders
interested in the Fund's objective of long-term capital appreciation through
investing in Korean securities. Liquidation would terminate the existence of the
Fund -- an investment vehicle that has regularly achieved for its stockholders
investment results that have been significantly better than the performance of
the benchmark KOSPI index. Moreover, given the Fund's size and its investment in
smaller-cap and mid-cap stocks, and the taxes and expenses associated with
liquidation, we believe that liquidation of the Fund would be likely to produce
for Fund stockholders less than Fund NAV before liquidation.
Your Board, including Dr. Purcell and Mr. Esposito, regularly and carefully
reviews not only the Fund's investment performance, but also the discount at
which Fund shares have traded from net asset value. The Board intends to
continue to explore whether there are measures that could address the discount,
consistent with the Fund's investment objective and without harming the Fund's
investment performance. In light of the Fund's record of achieving long-term
capital appreciation, the Board and its candidates do not believe that excessive
self-tenders would be in the best interests of the Fund and its stockholders.
26
Candidates' Commitment to Good Corporate Governance
The Fund's candidates are members of a Board that has demonstrated its
commitment to good corporate governance:
o On May 10, the Board appointed the Chairman of the Committee on Independent
Directors to be Chairman of the Board. This reaffirms the Board's
long-standing commitment to:
- strong, independent oversight of the Fund's operations; and
- progressive governance practices that seek to protect and serve the
interests of the Fund and its stockholders.
o The overwhelming majority of the Fund's directors (currently six out of
seven) have always been independent directors, not affiliated with the
Fund's investment manager.
o The Fund's Nominating and Audit Committees are comprised solely of
independent directors.
Experience of Candidates
The Board believes its nominees are well qualified to promote the objectives of
the Fund as a vehicle to invest for long-term capital appreciation in Korean
stocks. Each of the existing directors who is being proposed for re-election by
the Fund has the necessary depth of experience to represent the best interest of
ALL of the Fund's shareholders.
Susan Kaufman Purcell is Vice President of the Council of the Americas and the
Americas Society. Dr. Purcell has also been a Senior Fellow at the Council on
Foreign Relations, where she directed its Latin America program, a member of the
U.S. Department of State's Policy Planning Staff, a tenured professor of
political science at the University of California, Los Angeles (UCLA) and a
visiting professor at Columbia University. Dr. Purcell's books include "Brazil
Under Cardoso," "Europe and Latin America in the World Economy," and "Latin
America: U.S. Policy After the Cold War."
Vincent J. Esposito, the Vice Chairman of the Board, is a Managing Director of
Deutsche Asset Management and is the only director who is affiliated with the
Fund's investment manager. He is a Vice President of Central European Equity
Fund, Inc. and of the Germany Fund, and a director of three other funds managed
by the Fund's investment manager. He has over 20 years of professional
experience developing and building investment products and establishing global
joint ventures and new business opportunities in asset management.
Other Matters
The Board of Directors does not know of any matters to be brought before the
Meeting other than those mentioned in this Proxy Statement. The appointed
proxies will vote on any other business that comes before the Meeting or any
adjournment or postponement thereof in their discretion.
27
Miscellaneous
Proxies will be solicited by mail and may be solicited in person or by telephone
by Officers of the Fund or personnel of DeAM. The Fund has retained Georgeson
Shareholder Communications, Inc. ("Georgeson"), 17 State Street, New York, New
York 10004 to assist in the proxy solicitation. Georgeson will be paid a fee not
to exceed $200,000 plus expenses and will employ up to approximately 30 people
to solicit stockholders. Georgeson will also be reimbursed for its expenses. The
costs and expenses connected with the solicitation of proxies by the Fund's
Officers or Georgeson, in person or by telephone, will be borne by the Fund. The
Fund will reimburse banks, brokers, and other persons holding the Fund's shares
registered in their names or in the names of their nominees, for their expenses
incurred in sending proxy material to and obtaining proxies from the beneficial
owners of such shares. Due to the City of London solicitations and
counter-solicitations, expenses related to the Fund's solicitation of
stockholders, in excess of those normally expended in an election of Directors,
including fees for attorneys, proxy solicitors, advertising, printing,
transportation and other related expenses, are expected to aggregate
approximately $400,000, approximately $61,000 of which has been spent to date.
Certain information about the employees of the Investment Manager who will be
soliciting proxies on the Fund's behalf is set forth in Appendix D. Appendix E
sets forth certain other information relating to the Directors and executive
officers of the Fund and these employees (collectively, the "Participants").
Solicitation of proxies is being made primarily by the mailing of this Proxy
Statement with its enclosures on or about August 20, 2004. As mentioned above,
Georgeson will assist in the solicitation of proxies.
As the meeting date approaches, certain stockholders may receive telephone calls
from representatives of Georgeson if their votes have not been received.
Authorization to permit Georgeson to execute proxies may be obtained by
telephonic instructions or electronically transmitted instructions from
stockholders of the Fund. If proxies are obtained telephonically, they will be
recorded in accordance with procedures that are consistent with applicable law
and that the Fund believes are reasonably designed to ensure that both the
identity of the stockholder casting the vote and the voting instructions of the
stockholder are accurately determined.
If a stockholder wishes to participate in a meeting, but does not wish to give a
proxy by telephone, the stockholder may still submit the proxy card originally
sent with this proxy statement. Should stockholders require additional
information regarding the proxy or a replacement proxy card, they may contact
Georgeson toll-free at 1-800-843-0369. Any proxy given by a stockholder is
revocable until voted at a meeting. See "Proxy Statement -- General."
In the event that sufficient votes in favor of any proposal set forth in the
Notice of this Meeting are not received by October 6, 2004, the persons named as
appointed proxies on the enclosed proxy card may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. Any such
adjournment will require the affirmative vote of a majority of the votes
entitled to be cast at the session of the meeting to be adjourned. The persons
named as appointed proxies on the enclosed proxy card will vote in favor of such
adjournment those proxies which they are entitled to vote in favor of the
proposal for which further solicitation of proxies is to be made. They will vote
against any such adjournment those proxies required to be voted against such
proposal. The costs of any such additional solicitation and of any adjourned
session will be borne by the Fund.
28
Stockholder Proposals
Stockholders wishing to submit proposals for inclusion in the Fund's proxy
statement for the 2005 meeting of stockholders of the Fund should send their
written proposals to John Millette, Secretary of the Fund, c/o Deutsche
Investment Management Americas Inc., at 345 Park Avenue, New York, New York
10154, by April 22, 2005. The timely submission of a proposal does not guarantee
its inclusion.
For nominations of candidates for election as Directors (other than nominations
made by or at the recommendation of the Directors) or other business to be
properly brought before the annual meeting by a stockholder, the stockholder
must comply with the Fund's bylaws, which, among other things, require that the
stockholder must give timely notice thereof in writing to the Secretary of the
Fund, the stockholder must be a stockholder of record, and the notice must
contain the information about the nomination or other business that is required
by the Fund's bylaws. To be timely, any such notice must be delivered to or
mailed by certified mail, return receipt requested, and received at the
principal executive offices of the Fund not later than 90 days nor more than 120
days prior to the date of the meeting; provided, however, that if less than 100
days' notice or prior public disclosure is given or made to stockholders, any
such notice by a stockholder to be timely must be so received not later than the
close of business on the 10th day following the earlier of the day on which such
notice of the date of the annual or special meeting was given or such public
disclosure was made.
By order of the Board of Directors,
/s/John Millette
John Millette
Secretary
345 Park Avenue
New York, New York 10154
August 20, 2004
29
APPENDIX A
THE KOREA FUND, INC.
AUDIT COMMITTEE CHARTER
ADOPTED APRIL 7, 2004
This document constitutes the Charter of the Audit Committee (the "Committee")
of the Board of Directors of The Korea Fund, Inc. (the "Fund"). The Board of
Directors of the Fund (the "Board") established the Committee to provide
oversight with respect to the Fund's accounting and financial reporting policies
and practices.
1. Organization. The Committee shall be composed of three or more members of
the Board who are not "interested persons" (as defined in the Investment
Company Act of 1940) of the Fund, who do not directly or indirectly receive
consulting, advisory or other compensatory fees from the Fund or from the
Fund's investment adviser or its affiliates, except fees from the Fund for
services as a Director, and who satisfy any independence or expertise
requirements or expertise requirements of the exchange(s) on which the
Fund's shares are traded.
2. Meetings. The Committee shall meet on a regular basis as necessary or
appropriate, and is empowered to hold special meetings as circumstances
warrant.
3. Committee Purposes. The purposes of the Committee are as follows:
(a) To oversee the Fund's accounting and financial reporting policies and
practices, the Fund's internal controls (including disclosure controls
and procedures) and, as appropriate, the internal controls of certain
Fund service providers;
(b) To oversee the quality and objectivity of the Fund's financial
statements and the independent audit thereof;
(c) To exercise direct responsibility for the appointment, compensation,
retention and oversight of the work performed by the Fund's
independent auditors for the purpose of preparing or issuing an audit
report or performing other audit, review or attest services for the
Fund;
(d) To act as a liaison between the Fund's independent auditors and the
Board;
(e) To oversee the Fund's compliance with legal and regulatory
requirements; and
(f) To prepare an audit committee report as required by Item 306 of
Regulation S-K to be included in the Fund's annual proxy statement
relating to the election of directors, or, if the Fund does not file a
proxy statement, in the Fund's annual report filed with the Securities
and Exchange Commission.
The function of the Audit Committee is oversight; it is management's
responsibility to maintain or arrange for the maintenance of appropriate systems
for accounting and internal controls (including disclosure controls and
procedures), and the auditor's responsibility to plan and carry out a proper
audit.
30
4. Duties and Powers. To carry out the purposes specified in Paragraph 3
above, the Committee shall have the following duties and powers:
(a) To approve the selection, retention, compensation and termination of
the Fund's independent auditors, and, in connection therewith, to
evaluate and determine the terms of any engagement of the auditors
(including fees) by or on behalf of the Fund, as well as to set clear
hiring policies relating to the hiring by entities within the Fund's
investment complex^1 of employees or former employees of the
independent auditors;
(b) To consider whether the provision of non-audit services rendered by
the independent auditors to the Fund and the Fund's investment adviser
and its affiliates, or any other circumstances which may arise, impair
the independence of independent auditors;
(c) To: (i) at least annually, obtain and review a report by the
independent auditor describing: the firm's internal quality-control
procedures; any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by any inquiry
or investigation by governmental or professional authorities, within
the preceding five years, respecting one or more independent audits
carried out by the firm, and any steps taken to deal with any such
issues; and (to assess the auditor's independence) all relationships
between the independent auditor and the Fund; (ii) discuss the annual
audited financial statements and any interim financial statements with
management and the independent auditor, including the Fund's
disclosures under "Portfolio Management Review;" and (iii) discuss
policies with respect to risk assessment and risk management;
(d) To meet with the Fund's independent auditors, including private
meetings as necessary or appropriate: (i) to review the arrangements
for and scope of the Fund's annual audit and any special audits; (ii)
to discuss any matters of concern relating to the Fund's financial
statements, including any adjustments to such statements recommended
by the auditors, regulatory and tax compliance matters considered in
the preparation of the financial statements, or other results of said
audit(s); (iii) to consider the auditors' comments with respect to the
Fund's financial policies and procedures, internal accounting controls
and disclosure controls and procedures, and management's responses
thereto; (iv) to review the form of the opinion the auditors propose
to render to the Board and Fund stockholders; and (v) to review any
other reports, representations or communications from the auditors
regarding matters within the Committee's scope of responsibilities
under this Charter;
-------------------
^1 "Investment company complex" includes:
- the Fund and its investment adviser or sponsor;
- any entity controlling, controlled by or under common control with the
investment adviser or sponsor, if the entity (i) is an investment adviser
or sponsor or (ii) is engaged in the business of providing administrative,
custodian, underwriting or transfer agent services to any investment
company, investment adviser or sponsor; and
- any investment company, hedge fund or unregistered fund that has an
investment adviser included in the definition set forth in either of the
sections above.
31
(e) To meet regularly with the Fund's chief financial and accounting
officers, the Fund's Treasurer and the Fund's investment adviser's
internal auditors, in each case to discuss any matters the Committee
or such parties believe necessary or appropriate to raise, and to
review and consider any reports or communications from any such
parties relating to the operations of the Fund;
(f) To review such other matters or information that the Committee
believes may be relevant to the auditors, the audit engagement, or the
Fund's financial policies and procedures, internal accounting controls
or disclosure controls and procedures;
(g) To establish procedures for the receipt, retention and treatment of
complaints that the Fund receives regarding Fund accounting, internal
accounting controls or auditing matters, and for the confidential,
anonymous submissions by Fund officers or employees of Fund service
providers of concerns regarding suspected fraud of any type related to
the Fund, including without limitation questionable accounting or
auditing matters;
(h) To establish procedures for the prospective approval of the engagement
of the independent auditors to provide: (i) audit or permissible
non-audit services to the Fund, and (ii) non-audit services to the
Fund's investment advisers (or any entity controlling, controlled by
or under common control with a Fund investment adviser that provides
ongoing services to the Fund) that relate directly to the Fund's
operations and financial reporting;
(i) To establish guidelines pursuant to which the independent auditors are
required to keep the Committee apprised of any proposed new
relationships between the independent auditors and the Fund's
investment advisers (and their affiliates); and
(j) To report its activities to the Board on a regular basis and to make
such recommendations with respect to the above and other matters as
the Committee may deem necessary or appropriate.
5. Role of Independent Auditors. The Fund's independent auditors are
ultimately accountable to the Committee, and must report directly to the
Committee.
6. Resources and Authority. The Committee shall have the resources and
authority necessary or appropriate for purposes of discharging its
responsibilities under this Charter, including the authority to consult
with counsel and/or to retain, at the Fund's expense, such other experts or
consultants as the Committee deems necessary or appropriate to fulfill its
responsibilities.
7. Periodic Review of Charter. The Committee shall review this Charter at
least annually and recommend any changes to the Board.
32
APPENDIX B
THE KOREA FUND, INC.
COMMITTEE ON INDEPENDENT DIRECTORS
CHARTER
ADOPTED APRIL 7, 2004
This document constitutes the Charter of the Committee on Independent
Directors (the "Committee") of the Board of Directors of The Korea Fund, Inc.
(the "Fund"). The Board of Directors of the Fund (the "Board") has adopted this
Charter to govern the activities of the Committee.
1. Statement of Purposes and Responsibilities. The primary purposes and
responsibilities of the Committee are: (i) to identify individuals
qualified to become members of the Board in the event that a position is
vacated or created; (ii) to recommend for the Board's selection the
Director nominees for the next annual meeting of stockholders if any is to
be held; (iii) to set any necessary standards or qualifications for service
on the Board; (iv) to review and evaluate the compensation practices of the
Directors who are not "interested persons" of the Fund, as defined in
Section 2(a)(19) of the Investment Company Act of 1940, as amended
("Independent Directors"), and to recommend any changes thereto to the
Board; (v) to determine the policies governing retirement of all
Independent Directors; (vi) to perform periodic evaluations of the
effectiveness of the Independent Directors; and (vii) to consider such
other matters of special relevance to Independent Directors.
2. Organization and Governance. The Committee shall be comprised of all of the
Independent Directors and shall not include any members who are not
Independent Directors.
A member of the Committee may be designated by the Board as the Committee's
chair (the "Lead Independent Director"). The Committee may delegate any
portion of its authority or responsibilities to a sub-committee of one or
more members.
The Committee will not have regularly scheduled meetings. Committee
meetings shall be held as and when the Committee or the Board determines
necessary or appropriate in accordance with the Fund's By-Laws. The Chair
of the Board, the Lead Independent Director or a majority of the members of
the Committee are authorized to call a meeting of the Committee and send
notice thereof.
A majority of the members of the Committee shall constitute a quorum for
the transaction of business at any meeting of the Committee. The action of
a majority of the members of the Committee present at a meeting at which a
quorum is present shall be the action of the Committee. The Committee may
also take action by written consent of a majority of the Committee members.
The Committee may meet by means of a telephone conference circuit or
similar communications equipment by means of which all persons
participating in the meeting can hear each other.
33
3. Qualifications for Director Nominees. The Committee requires that Director
candidates have a college degree or equivalent business experience. The
Committee may take into account a wide variety of factors in considering
Director candidates, including (but not limited to): (i) availability and
commitment of a candidate to attend meetings and perform his or her
responsibilities on the Board; (ii) relevant industry and related
experience; (iii) educational background; (iv) financial expertise; (v) an
assessment of the candidate's ability, judgment and expertise and (v)
overall diversity of the Board's composition.
4. Identification of Nominees. In identifying potential nominees for the
Board, the Committee may consider candidates recommended by one or more of
the following sources: (i) the Fund's current Directors; (ii) the Fund's
officers; (ii) the Fund's investment adviser(s); (iv) the Fund's
stockholders (see below); and (v) any other source the Committee deems to
be appropriate. The Committee may, but is not required to, retain a third
party search firm at the Fund's expense to identify potential candidates.
5. Consideration of Candidates Recommended By Stockholders. The Committee will
consider and evaluate nominee candidates properly submitted by stockholders
on the same basis as it considers and evaluates candidates recommended by
other sources. Appendix A to this Charter, as it may be amended from time
to time by the Committee, sets forth procedures that must be followed by
stockholders to properly submit a nominee candidate to the Committee
(recommendations not properly submitted in accordance with Appendix A will
not be considered by the Committee).
34
Appendix A to Committee on Independent Directors Charter
Procedures for Stockholders to Submit Nominee Candidates
Adopted April 7, 2004
A Fund stockholder must follow the following procedures in order to properly
submit a nominee recommendation for the Committee's consideration.
1. The stockholder must submit any such recommendation (a "Stockholder
Recommendation") in writing to the relevant Fund, to the attention of the
Secretary, at the address of the principal executive offices of the Fund.
2. The Stockholder Recommendation must be delivered to, or mailed by certified
mail, return receipt requested to and received at, the principal executive
offices of the Fund at least 120 calendar days before the anniversary of
the date on which the Fund's proxy statement was released to stockholders
in connection with the previous year's annual meeting.
3. The Stockholder Recommendation must include:
(a) a statement in writing setting forth (i) the name, age, date of birth,
business address, residence address, principal occupation or
employment, and nationality of the person recommended by the
stockholder (the "candidate"); (ii) the class or series and number of
all shares of the Fund owned of record or beneficially by the
candidate, as reported to such stockholder by the candidate; (iii) any
other information regarding the candidate called for with respect to
director nominees by paragraphs (a), (d), (e) and (f) of Item 401 of
Regulation S-K or paragraph (b) of Item 22 of Rule 14a-101 (Schedule
14A) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), adopted by the Securities and Exchange Commission (or
the corresponding provisions of any regulation or rule subsequently
adopted by the Securities and Exchange Commission or any successor
agency applicable to the Fund); (iv) any other information regarding
the candidate that would be required to be disclosed if the candidate
were a nominee in a proxy statement or other filing required to be
made in connection with solicitation of proxies for election of
directors pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder; and (v) whether the recommending
stockholder believes that the candidate is or will be an "interested
person" of the Fund (as defined in the Investment Company Act of 1940,
as amended) and, if not an "interested person," information regarding
the candidate that will be sufficient for the Fund to make such
determination;
35
(b) the written and signed consent of the candidate to be named as a
nominee and to serve as a Director if elected;
(c) the recommending stockholder's name and address as they appear on the
Fund's books;
(d) the class or series and number of all shares of the Fund owned
beneficially and of record by the recommending stockholder; and
(e) a description of all arrangements or understandings between the
recommending stockholder and the candidate and any other person or
persons (including their names) pursuant to which the recommendation
is being made by the recommending stockholder. In addition, the
Committee may require the candidate to furnish such other information
as it may reasonably require or deem necessary to determine the
36
APPENDIX C
INFORMATION AS TO CITY OF LONDON NOMINEES
The following information as to persons City of London, or its record owner,
Mellon, may seek to nominate at the Meeting has been furnished to the Fund by
City of London or its record owner, Mellon. The Fund has not verified the truth
or accuracy of this information.
Principal
Business
Occupations
Number of Shares of the During the
Name and Business Address Age Fund Beneficially Owned Last Five Years
----------------------------------------------------------------------------------
Julian M. I. Reid 59 None Chief
1 Queen Anne's Gate Executive
London SW1 H 9 BT Officer of 3a
England Asset
Management
Limited (since
1998);
President of
the Saffron
Fund, Inc.
(1994-1998;
since 2004);
Chairman of
the Board of
Directors of
the Saffron
Fund, Inc.
(since 1998);
Director of JF
China Region
Fund, Inc.
(since 1997);
and Chairman
of Morgan's
Walk
Properties
(since 2002).
----------------------------------------------------------------------------------
Chris Russell 55 None Director of
39 DeVere Gardens Candover plc
London W8 5AW (since 2004);
England Director of
LIM Japan Fund
(since 2002);
Director of
Enhanced Index
Funds (since
2002);
Director of
Investec High
Income Trust
(since 2001);
Consultant of
Gavekal
Research
(since 2001);
Director of
Gartmore
Investment
Management plc
(1997-2001).
----------------------------------------------------------------------------------
APPENDIX D
The following table sets forth the names and present principal occupations of
the Officers of the Fund and the employees of the Investment Manager of the Fund
who may be soliciting proxies on behalf of the Fund's Board of Directors.
Information regarding Directors who will be soliciting proxies is set forth in
"Proposal: Election of Directors" in this Proxy Statement.
Name and Principal Business Address Present Principal Occupation
-------------------------------------------------------------------------------------------------------------
Julian F. Sluyters President and Chief Executive Officer;
c/o Deutsche Investment Management Americas, Inc. Managing Director of DeAM
345 Park Avenue
New York, NY 10154
-------------------------------------------------------------------------------------------------------------
Patricia Rosch Director, DeAM
c/o Deutsche Investment Management Americas, Inc.
345 Park Avenue
New York, NY 10154
-------------------------------------------------------------------------------------------------------------
37
APPENDIX E
Information CONCERNING PARTICIPANTS
Dr. Purcell, as a Director of the Fund, and Mr. Esposito, as a Director of the
Fund and an executive officer of the Investment Manager and of Deutsche Bank
Securities Inc., and Ms. Rosch, as an officer of the Investment Manager, have an
interest in the election of directors because of those positions.
In addition to the Fund's Directors and executive officers, Mr. Sluyters,
President and Chief Executive Officer of the Fund and Managing Director of
Deutsche Asset Management, and Ms. Rosch, Director of Deutsche Asset Management,
may solicit proxies on behalf of the Fund. The business address of the Fund's
Directors and its executive officers, if not otherwise indicated in the Fund's
proxy solicitation materials, and of Mr. Sluyters and Ms. Rosch is The Korea
Fund, Inc., c/o Deutsche Investment Management Americas Inc., 345 Park Avenue,
New York, NY 10154.
For further information on the identity of participants who may be soliciting
proxies in connection with the Fund's annual meeting on October 6, 2004 and a
description of their interests, by security holdings or otherwise, please see
Exhibit A of the Schedule 14A filed by the Korea Fund, Inc. with the Securities
and Exchange Commission on July 20, 2004.
38
Please fold and detach card at perforation before mailing.
--------------------------------------------------------------------------------
PROXY PROXY
THE KOREA FUND, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Stockholders -- October 6, 2004
The undersigned hereby appoints Bruce Rosenblum, John Millette and Caroline
Pearson, and each of them, the proxies of the undersigned, with full power of
substitution in each of them, to represent the undersigned and to vote all
shares of The Korea Fund, Inc. which the undersigned is entitled to vote at the
Annual Meeting of Stockholders of The Korea Fund, Inc. to be held at the offices
of Deutsche Investment Management Americas Inc.,part of Deutsche Asset
Management, 29th Floor, East Side, 280 Park Avenue (at 48th - 49th Streets), New
York, New York 10017, on Wednesday, October 6, 2004 at 10:45 a.m., Eastern time,
and at any adjournment or postponement thereof. The undersigned acknowledges
receipt of the Notice of Annual Meeting of Stockholders and accompanying Proxy
Statement and revokes any proxy previously given with respect to the meeting.
(continued on other side)
Instructions for Voting Your Proxy
The Korea Fund offers stockholders of record three alternative ways of
authorizing proxies to vote their shares:
o By Telephone
o Through the Internet (using a browser)
o By Mail (traditional method)
Your telephone or Internet instructions authorize the named proxies to vote your
shares in the same manner as if you had mailed your proxy card. We encourage you
to use these cost effective and convenient ways of voting.
---------
Telephone Available only until 4:00 p.m. Eastern time on October 5, 2004.
---------
o Call TOLL-FREE: 1-800-433-2279 on any touch-tone telephone to authorize
voting of your shares. You may call 24 hours a day, 7 days a week. You will
be prompted to follow simple instructions.
o Your voting instructions will be confirmed and shares voted as you directed.
---------
Internet Available only until 4:00 p.m. Eastern time on October 5, 2004.
---------
o Visit the Internet voting Website at http://proxy.georgeson.com
o Enter the COMPANY NUMBER AND CONTROL NUMBER shown below and follow the
instructions on your screen.
o Your voting instructions will be confirmed and shares voted as you directed.
o You will incur only your usual Internet charges.
-------
By Mail
-------
o Simply sign and date your proxy card and return it in the postage-paid
envelope.
-------------- --------------
COMPANY NUMBER CONTROL NUMBER
-------------- --------------
Please fold and detach card at perforation before mailing.
--------------------------------------------------------------------------------
This proxy, if properly executed, will be voted in the To vote, mark
manner directed. If no instructions are indicated on a blocks below in
properly executed proxy, the undersigned's vote will be blue or black
cast "FOR" Proposal 1 and "AGAINST" Proposal 2. ink as follows: /X/
The Board of Directors of the Fund recommends that Stockholders vote "FOR"
Proposal 1.
(1) The election of two Directors: FOR all nominees listed WITHHOLD AUTHORITY
at left (except as marked to vote for all nominees
Nominees: Class I: Vincent J. Esposito to the contrary below) listed at left
and Susan Kaufman Purcell
/_____/ /_____/
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
--------------------------------------------------------------------------------
The Board of Directors of the Fund recommends that Stockholders vote "AGAINST"
Proposal 2.
(2) To vote on a stockholder's proposal that FOR AGAINST ABSATIN
the investment management agreement, between
the Fund and Deutsche Investment Management /_____/ /_____/ /_____/
Americas Inc., as currently in effect of the
date hereof, be terminated immediately.
The Proxies are authorized to vote in their discretion on any other business
which may properly come before the meeting and any adjournments or postponements
thereof.
Please sign exactly as your name or names appear. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title as
such.
---------------------------------------------------------------
(Signature of Stockholder)
---------------------------------------------------------------
(Signature of joint owner, if any)
Date _______________________________________________________ , 2004
PLEASE SIGN AND RETURN PROMPTLY IN ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.